College & Workforce Readiness

Wider Access to Education Is Crucial to Fixing Income Inequality, Says Economist

By Caralee J. Adams — March 17, 2015 2 min read
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Education alone cannot close the growing issue of income inequality, but it is a crucial element, according to Nobel-winning economist Paul Krugman, who spoke here on Monday to college and university leaders.

Pointing to research that shows family income has an enormous impact on the ability of Americans to get into and finish college, Krugman said more investment in higher education could help address the problem. He put it bluntly: “Rich dumb kids are more likely to get a degree than poor smart kids.”

Joining Krugman on a panel at the American Council on Education’s annual meeting, Vassar College President Catharine Bond Hill talked about her school’s effort to expand access to disadvantaged students. Vassar tops The New York Times College Access Index for doing the most to attract economically diverse students.

At Vassar, nearly one-quarter of students are eligible for federal financial aid through Pell Grants, nearly double what it was about four years ago.

“The strategy is easy: Allocate more resources to need-based financial aid,” said Hill. “There are talented low-income kids who can come to our institutions and succeed.”

However, for every dollar the college spends on scholarships, less money is available for other services on campus. Hill acknowledged that colleges are competing for wealthy kids who are used to nice dorm rooms and even organic lawn care. As for switching priorities to help low-income students rather than catering to the high-income prospects, Hill told the audience of her colleagues: “It would be easier if all of you would do it, too.”

Krugman, a columnist for The Times spoke of how the wage advantage of having a college degree widened significantly between 1980 and 2000, but has not grown much since. Unemployment rates are lower for Americans with a college education, although entry-level wages have gone down for young college-educated workers, as is the case for all Americans.

“This has been an equal opportunity recession and it has afflicted everyone. Almost nobody’s wages are going up,” said Krugman. “We are becoming a society where social mobility is on the decline.”

Addressing the larger problem of inequality in society will depend on increasing access to higher education, said Krugman. Allotting 1-2 percent of gross domestic product to the access issue could be “transformative” and an investment that would pay off in productive taxpayers, he said.

“Every time a talented person blocked, it’s not just an individual is a waste of potential,” he said. “That future taxpayer is stuck in a low-paying job.”

While it used to be that students could earn enough in a summer job to pay for tuition, the high cost of college makes that “inconceivable” now, said Krugman. Just as prices are going up, aid is cut and the result is that access to higher education for low-income Americans is down, he said.

“Higher education is not supporting equal opportunity despite claiming to be a land of equal opportunity,” said Hill. However, she maintained that the increasing gulf between the rich and poor is primarily a result of government policy failure and higher education can’t solve the problem alone.

ACE President Molly Corbett Broad agreed that there is a deep commitment among colleges to provide opportunity despite ethnicity and income, “Yet it isn’t happening,” she said.

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A version of this news article first appeared in the College Bound blog.